How to calculate business rates for your small business

Business rates are an essential part of running a business in the United Kingdom. They are a tax imposed on non-domestic properties, including offices, shops, factories, and warehouses. Understanding how business rates are calculated is crucial for budgeting and financial planning. In this comprehensive guide, we will delve into the intricacies of business rates and provide you with a step-by-step process to calculate them accurately.

What are business rates and how are they calculated?

Business rates, also known as non-domestic rates, are the taxes levied by local authorities in the UK. They contribute to funding essential public services such as schools, waste collection, and infrastructure maintenance. The amount you pay in business rates is determined by multiplying the rateable value of your property by the relevant multiplier, also known as the uniform business rate (UBR).

The rateable value is an estimation of the annual rental value of your property on a specific date. It is assessed by the Valuation Office Agency (VOA) and is based on various factors such as location, size, and property type. Once the rateable value is determined, it is multiplied by the UBR set by the government to calculate the final business rates bill.

Understanding the rateable value of your property

The rateable value is a fundamental component in the calculation of business rates. It reflects the rental value of your property on a specific date, usually set every five years. The Valuation Office Agency (VOA) assesses the rateable value based on factors such as location, size, usage, and property type.

To find the rateable value of your property, you can visit the government’s website and use their online search tool. Simply enter your property’s address, and the tool will provide you with the rateable value. It’s important to note that the rateable value may change over time due to property renovations, changes in property usage, or reassessment by the VOA.

Factors that affect your business rates

Several factors can influence the amount you pay in business rates. It’s essential to understand these factors to accurately calculate your business rates and plan your finances effectively. Here are some key factors that affect your business rates:

1. Location: Properties located in prime areas or city centers tend to have higher rateable values and, consequently, higher business rates. The demand and desirability of the location play a significant role in determining the rateable value.
2. Property size: The size of your property is a crucial factor in the calculation of business rates. Larger properties generally have higher rateable values, leading to higher business rates.
3. Property usage: The type of property and its designated usage also impact the rateable value and, therefore, the business rates. Different property types, such as retail, industrial, or office spaces, have varying rateable values.
4. Property condition: The condition and amenities of your property can also affect the rateable value. Well-maintained properties with modern facilities may have higher rateable values compared to older or poorly maintained ones.
5. Revaluation: Revaluation exercises conducted by the Valuation Office Agency periodically can significantly impact your rateable value. These revaluations aim to reflect changes in property values and market conditions.

Understanding these factors will help you assess the potential impact on your business rates and take appropriate measures to manage your finances effectively.

Exemptions and reliefs for business rates

While business rates are an unavoidable part of running a business in the UK, there are exemptions and reliefs available that can help reduce the burden. It’s crucial to explore these options as they can have a significant impact on your business’s financial health. Here are some common exemptions and reliefs for business rates:

1. Small Business Rate Relief (SBRR): This relief is available for businesses with a rateable value below a certain threshold. Eligible businesses can receive a significant reduction or complete exemption from business rates.
2. Rural Rate Relief: Designed to support businesses in rural areas, this relief offers a reduction in business rates for eligible properties located in designated rural settlements.
3. Charitable Rate Relief: Registered charities and non-profit organizations can apply for charitable rate relief, which provides a reduction in business rates on eligible properties used for charitable purposes.
4. Empty Property Relief: If your property is unoccupied, you may be eligible for empty property relief, which provides a temporary exemption from business rates for a specified period.
5. Enterprise Zones: Properties located within designated enterprise zones may qualify for business rate discounts or exemptions to encourage business growth and investment in those areas.

It’s essential to research and understand the specific criteria and application processes for these reliefs, as they can vary depending on your location and circumstances. Taking advantage of these exemptions and reliefs can significantly reduce your business rates and help you allocate your financial resources more efficiently.

Step-by-step guide on calculating your business rates

Calculating your business rates can seem daunting, but with a systematic approach, it becomes more manageable. Follow this step-by-step guide to accurately calculate your business rates:

1. Gather property information: Start by collecting all the relevant information about your property, including its address, size, usage, and any recent changes or renovations that may affect the rateable value.
2. Find the rateable value: Use the Valuation Office Agency’s online search tool or contact your local council to obtain the rateable value of your property. Make sure to note the date of the valuation, as it may impact the multiplier used in the calculation.
3. Determine the UBR: The uniform business rate (UBR), also known as the multiplier, is set by the government and varies each year. Visit the government’s website or contact your local council to find the current UBR applicable to your property.
4. Multiply the rateable value by the UBR: Multiply the rateable value of your property by the UBR to calculate the gross annual business rates. This will give you an estimate of the total amount you need to pay before any exemptions or reliefs.
5. Apply any exemptions or reliefs: If you qualify for any exemptions or reliefs, subtract the applicable amount from the gross annual business rates calculated in the previous step. This will give you the final amount you are liable to pay.

By following these steps, you can accurately calculate your business rates and have a clear understanding of your financial obligations.

Examples and case studies of business rate calculations

To provide you with a better understanding of how business rates are calculated, let’s explore some examples and case studies:

1. Example 1 – Retail store: Our example retail store has a rateable value of £50,000. The current UBR is 50p. To calculate your business rates, multiply the rateable value (£50,000) by the UBR (0.50). This results in an annual business rates bill of £25,000.
2. Example 2 – Office space: For an office with a rateable value of £100,000 and if it qualifies for Small Business Rate Relief (SBRR). The current UBR is 50p, but with SBRR, you receive a 50% reduction. Multiply the rateable value (£100,000) by the UBR (0.50) and apply the SBRR reduction (50%). This brings your annual business rates bill down to £25,000.

These examples illustrate how the rateable value and applicable reliefs can impact your business rates. It’s crucial to consider your specific circumstances and consult with professionals if needed to ensure accurate calculations.

How to appeal your business rates

If you believe your business rates have been incorrectly assessed, it is your right to appeal the decision. The appeal process can be complex, but it’s worth exploring if you feel that the rateable value or any other factors have been inaccurately determined. Here’s a general overview of the steps involved in appealing your business rates:

1. Gather evidence: Collect all the necessary evidence to support your appeal. This may include recent rental values of comparable properties, details of any property modifications or changes, or evidence of a decline in the local area’s economic conditions.
2. Contact the Valuation Office Agency (VOA): Reach out to the VOA and discuss your concerns. They may be able to address your issues and provide guidance on the next steps.
3. Submit a formal appeal: If you are dissatisfied with the VOA’s response, you can formally appeal the decision. This usually involves completing an appeal form and providing all the relevant evidence to support your case.
4. Attend a hearing: Depending on the complexity of your appeal, you may be required to attend a hearing where you can present your case in front of a Valuation Tribunal. It’s essential to prepare thoroughly and seek professional advice if needed to maximize your chances of a successful appeal.

Remember that the appeal process can be time-consuming, and there are strict deadlines to adhere to. It’s advisable to seek professional advice to navigate the process effectively and ensure the best possible outcome for your appeal.

Additional resources and tools for calculating business rates

Calculating business rates requires accurate information and understanding of the applicable rules and regulations. To assist you in this process, here are some additional resources and tools you can utilize:

1. Government websites: Visit the official government websites, such as the Valuation Office Agency and the Business Rates section of your local council’s website. These platforms provide valuable information on business rates, exemptions, reliefs, and the latest UBR.
2. Business rates calculator: Use the online business rates calculators available on various commercial property websites such as Knight Frank. These calculators simplify the process by allowing you to input your property details and providing an estimate of your business rates.
3. Professional advice: If you have a complex case or need expert guidance, consider consulting with professionals specializing in business rates. They can provide personalized advice based on your specific circumstances and help you optimize your business rates.

By utilizing these resources and tools, you can enhance your understanding of business rates and make more informed decisions regarding your financial obligations.

Summary

Calculating your business rates in the UK is a crucial step in managing your business’s finances effectively. By understanding the components involved, such as the rateable value, UBR, and applicable exemptions, you can accurately calculate your business rates and explore ways to reduce the burden through reliefs and appeals.

Remember to stay informed about changes in the UBR and periodically review your rateable value to ensure you are paying the correct amount. Utilize the additional resources and tools available to enhance your knowledge and seek professional advice when necessary.

With a comprehensive understanding of how to calculate your business rates, you can make informed financial decisions and allocate your resources efficiently, contributing to the growth and success of your business.